HEADNOTE: Foss Nirsystems, Inc. v. Comptroller of theTreasury, No. 1428, September Term, 2002

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USE TAX –

Tax-Gen. Sec. 11-101(l)(3)(iii) provides that “use” does notinclude the exercise of a right or power over tangiblepersonal property if the buyer intends to resell theproperty in the same form. The tax court did not err inaffirming the Comptroller’s interpretation of the exclusionto mean that products held for sale and demonstrated for thepurpose of selling the same or similar products must be heldsolely or primarily for resale to come within the exclusion.

REPORTED

IN THE COURT OF SPECIAL APPEALS

OF MARYLAND

No. 1428

September Term, 2002

FOSS NIRSYSTEMS, INC.

v.

COMPTROLLER OF THE TREASURY

Davis,Eyler, James R.,Rodowsky, Lawrence F. (Ret., specially assigned),

JJ.

Opinion by Eyler, James R., J.

Filed: May 6, 2003

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The Comptroller of the Treasury, appellee, assessed a use

tax on certain equipment owned by Foss NIRSystems, Inc.,

appellant. Appellant appealed to the Maryland Tax Court, which

affirmed the assessment. Appellant filed a petition for judicial

review in the Circuit Court for Montgomery County, which affirmed

the tax court.

The statutory provision at issue is Md. Code (1997 Repl.

Vol.), Tax-General, section 11-101(l)(3)(ii), which provides that

“use” does not include the exercise of a right or power over

tangible personal property if the buyer intends to resell the

property in the same form. The principal questions before us are

(1) whether the tax court committed an error of law in affirming

the Comptroller’s interpretation of the exclusion to mean that

products held for sale and demonstrated for the purpose of

selling the same or similar products must be held solely or

primarily for resale to come within the exclusion, (2) whether

the Comptroller’s interpretation constituted a change in policy

requiring an administrative regulation, and (3) whether the tax

court’s decision was supported by substantial evidence. We shall

answer the first two questions in the negative and the last

question in the affirmative and, thus, affirm the judgment of the

circuit court.

Factual Background

The basic underlying facts are not in dispute. Appellant is

1Appellant is a subsidiary of a Massachusetts corporation,which was owned by a Swedish Corporation at the time of theaudit, and is now owned by a Danish corporation.

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a Delaware corporation with its principal office located in

Silver Spring.1 Appellant designs, manufactures, and sells Near-

Infrared (NIR) spectrographic analyzers, also known as

spectrophotometers, which are used in the chemical, polymer,

pharmaceutical, food, and agricultural products industries for

quantitative and qualitative analyses of substances. Generally,

each spectrophotometer is comprised of a monochromator, a

sampling module, and associated software. The sale of the

equipment includes training for two people in the use of the

equipment. The training occurs at appellant’s Silver Spring

offices. The equipment in question is manufactured in Maryland.

Appellant has no warehouse facilities in Maryland, but its

executive offices are in Maryland.

The substance that is to be tested is placed in the sampling

module, and the monochromator measures the spectral range of the

substance and compares it with known data stored in the software.

Appellant offers nine different monochromators and twenty two

different sampling modules. Appellant custom configures each

spectrophotometer to suit a particular customer’s needs.

The equipment in question is not sold off the shelf.

Appellant offers demonstrations to potential customers, usually

conducted at the customer’s place of business, or appellant

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obtains samples of the customer’s products and conducts a study

at its Silver Spring offices. The latter procedure is called a

“feasibility study.” Such a study is sometimes followed by a

demonstration at the customer’s site. The purpose of a

demonstration is to establish suitability for a particular

application and to assist a customer in selecting the most

appropriate configuration. Appellant also demonstrates the

equipment at trade shows and conventions, loans it to

universities and other educational institutions, and uses it in

its training laboratory. One of the purposes of taking the

equipment to trade shows and conventions and loaning it to

educational institutions is to create future markets. Appellant

performs approximately 150 demonstrations per year at a potential

customer’s site and approximately 70 feasibility studies per year

at its headquarters. The great bulk of demonstrations occurs

outside of Maryland, and the great bulk of sales occurs to

customers located outside of Maryland. The equipment in question

is available for sale to potential customers at all times.

Customers sometimes buy the demonstration model and sometimes buy

a new piece of equipment configured to meet the customer’s needs.

The parties differ in their interpretation of appellant’s

accounting practices with respect to the equipment. The

equipment is in an account called “demonstration inventory,”

which appellant states is a subcategory of sales inventory.

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While acknowledging that it depreciates the demonstration

inventory internally, appellant states that it does not

depreciate it for income tax purposes. Appellant also

acknowledges that the movement of items in the demonstration

inventory is tracked under appellant’s fixed asset tracking

system but states that it is done only for the purpose of

tracking and the inventory equipment is not accounted for as

fixed assets. Appellee interprets appellant’s accounting as

treating the demonstration equipment as fixed assets.

At the time of the audit that resulted in the assessment in

dispute, the demonstration inventory list reflected approximately

365 items. Of that total, 275 had been in demonstration

inventory for over one year.

On April 15, 1998, appellee issued a Notice of Final

Determination and assessed a use tax on appellant’s demonstration

inventory in the amount of $155,865.77, including interest, for

the period of time from May 1, 1992, to January 31, 1997. See

Md. Code (1997 Repl. Vol.), Tax-Gen. §§ 13-303, 13-402. On April

17, 1998, appellant appealed to the Maryland Tax Court. The

items in the demonstration inventory that were challenged

involved approximately $72,000 in tax. In a memorandum and order

dated March 15, 2001, the tax court affirmed the assessment. In

part, the tax court found:

We agree with the Comptroller that Foss’sdemonstration inventory was used by Foss for

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demonstrations to prove that the product wascapable of being adapted to the customer’sparticular applications or use. The primarypurpose of the demonstration was not to sella specific item of equipment beingdemonstrated. Often the inventory was usedfor training or for displays anddemonstrations at trade shows andconventions. In addition, the inventory wasprovided to universities and colleges for anumber of years in order to develop newmarkets for the sale of Foss’s equipment. Although the demonstration inventory may havebeen available for sale, the primary purposeof the demonstration inventory was for apurpose other than resale. The demonstrationinventory was in fact being used and that usewas not incidental. Approximately threequarters of the demonstration inventoryprovided to the Auditor had been used asdemonstration equipment for over one year. The 70 feasibility studies performed eachyear, as well as the 150 on-site consumercustomer demonstrations performed every year,together with the training sessions held 3out of 4 weeks every month indicate an actualuse of the demonstration inventory forbusiness purposes and not for the sale of aparticular piece of equipment.

Appellant filed a petition for judicial review in circuit

court. In an opinion and order dated July 23, 2002, the court

affirmed the tax court’s decision.

Standard of Review

This case comes to us from the Circuit Court for Montgomery

County, as a result of a petition for judicial review filed in

that court. See Md. Code. (1997 Repl. Vol.), Tax-Gen. § 13-532

(“A final order of the Tax Court is subject to judicial review”).

“Despite its name, the Tax Court is not a court; instead, it is

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an adjudicatory administrative agency in the executive branch of

state government.” Furnitureland S. v. Comptroller of the

Treasury of State, 364 Md. 126, 138 (2001) (citing Kim v.

Comptroller, 350 Md. 527, 534 (1998); Shell Oil Co. v.

Supervisor, 276 Md. 36, 43-47 (1975)). Thus, the applicable

standard of review is an administrative one. See Rossville

Vending Mach. Corp. v. Comptroller of Treasury, 97 Md. App. 305,

310-12 (1993); Pinder v. Dean, 70 Md. App. 252, 255-58 (1987),

aff’d, 312 Md. 154 (1988).

“When reviewing a decision of an administrative agency, this

Court’s role is ‘precisely the same as that of the circuit

court.’” Stover v. Prince George's County, 132 Md. App. 373,

380-81 (2000) (citing Department of Health and Mental Hygiene v.

Shrieves, 100 Md. App. 283, 303-304 (1994)). We look only at

“the decision of the agency, not that of the circuit court.”

Lucas v. People’s Counsel for Baltimore County, 147 Md. App. 209,

225 (2002) (citing Carriage Hill-Cabin John, Inc. v. Maryland

Health Resources Planning Comm’n, 125 Md. App. 183, 211 (1999)).

Administrative decisions, such as those by the tax court,

receive considerable deference by reviewing courts. See, e.g.,

Comptroller of Treas., Income Tax Div. v. Diebold, Inc., 279 Md.

401, 407 (1977); accord State Dep’t of Assessment & Taxation v.

North Baltimore Ctr., Inc., 361 Md. 612, 616 (2002); Supervisor

of Assmts. v. Southgate Harbor, 279 Md. 586, 595 (1977). This is

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because “a simple but fundamental rule of administrative law . .

. is . . . that a reviewing court, in dealing with a

determination or judgment which an administrative agency alone is

authorized to make, must judge the propriety of such action

solely by the grounds invoked by the agency.” Burlington Truck

Lines, Inc. v. United States, 371 U.S. 156, 167-69 (1962).

Section 2-102(9) of the Tax-General Article in the Maryland Code

(1997 Repl. Vol.) delegates to the Comptroller the task of

enforcing Maryland’s sales and use tax laws.

Therefore, we are constrained to accept the factual findings

of the agency if reasonable minds could possibly have reached the

same conclusions based upon substantial evidence found in the

record. Fairchild Hiller Corp. v. Supervisor of Assessments, 267

Md. 519, 521 (1973) (citing Diebold, Inc., 279 Md. at 407 (“The

application of this test need not and must not be either judicial

fact finding or a substitution of judicial judgment for agency

judgment.”)); accord Comptroller of Treas. v. Shell Oil Co., 65

Md. App. 252, 259 (1985); Supervisor of Assmts. v. Fitzgerald, 49

Md. App. 411, 419 (1981); Comptroller of Treas. v. Machiz, 42 Md.

App. 218, 225 (1979).

We may review legal conclusions de novo, however, to ensure

that the tax court decision was not "premised solely upon an

erroneous conclusion of law." Ramsay, Scarlett & Co. v.

Comptroller, 302 Md. 825, 834 (1985) (citing Comptroller of

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Treasury, Income Tax Div. v. Haskin, 298 Md. 681, 693 (1984));

see also Director of Fin. v. Charles Towers Pshp., 104 Md. App.

710, 717 (1995); Comptroller of Treas. v. World Book Childcraft

Int'l, Inc., 67 Md. App. 424, cert. denied, 307 Md. 260 (1986).

We have long recognized that the interpretation of tax law

can be both legal and factual in nature:

It is clear that the Comptroller’s findingsof fact are final, and the court cannotproperly substitute its own judgment. However, questions of fact, in this type ofcase, shade into mixed questions of law andfact, and courts may consider the facts atleast for the purpose of ascertaining whetherthere is evidence to support a legalconclusion that necessarily involves thedrawing of a line.

Comptroller of the Treasury v. Smith, 205 Md. 408, 414 (1954)

(cited in Aerial Products, 210 Md. 627, 632 (1956)). In cases of

mixed questions of law and fact, we must insure that the tax

court applied the law correctly to the facts as it found them.

Ramsay, Scarlett & Co. v. Comptroller, 302 Md. at 834. If the

tax court decision was not erroneous as a matter of law, and its

conclusion was supported by substantial evidence, we must affirm

the decision. CBS Inc. v. Comptroller of Treas., 319 Md. 687,

697-98 (1990) (citations omitted); Diebold, Inc., 279 Md. at 407.

Contentions

Appellant contends (1) the interpretation of the statutory

provision in question is a legal question to which no deference

is owed to the Comptroller or the tax court, (2) the language

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clearly does not require that equipment demonstrated for the

purpose of selling the same or similar equipment be held solely

or primarily for resale, (3) the statutory provision is an

exclusion and thus should be strictly construed, (4) appellant’s

interpretation is supported by case law, and (5) the

Comptroller’s assessment of a use tax constituted a change in

policy and required promulgation of a regulation as distinguished

from an adjudicative determination.

The Comptroller contends (1) the interpretation of the

statutory definition of “use” is a mixed question of law and fact

to which deference is owed, (2) the Comptroller’s interpretation

is supported by legislative history and administrative and

judicial interpretation, (3) the finding that the equipment was

used for purposes other than resale was supported by substantial

evidence, and (4) no regulation was required because the tax was

imposed pursuant to a long standing policy that any tangible

personal property acquired for use and not held solely for resale

is subject to the use tax.

Analysis

Review of Tax Court’s Decision

Maryland imposes a five per cent sales tax on retail sales

and a five per cent use tax on the use of tangible personal

property or taxable services in the State. Md. Code (1997 Repl.

Vol.), Tax-Gen. § 11-102(a). The sales and use tax provisions

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are complementary. Comptroller of the Treasury v. Glenn L.

Martin Co., 216 Md. 235, 242 (1958). Generally, the use tax only

applies to transactions subject to the sales tax but on which no

tax has been paid. Id.

Section 11-101(l) of the Tax-General Article, Md. Code (1997

Repl. Vol.), defines “use” as:

(l) Use. — (1) "Use" means an exercise of a right orpower to use, consume, possess, or store thatis acquired by a sale for use of:

(i) tangible personal property; or (ii) a taxable service.

(2) "Use" includes an exercise of a right or power touse, consume, possess, or store that is acquired by asale for use of tangible personal property:

(i) for use or resale in the form of real estateby a builder, contractor, or landowner; or (ii) except as provided in paragraph (3)(i) ofthis subsection, as facilities, tools, tooling,machinery, or equipment, including dies, molds,and patterns, even if the buyer intends totransfer title to the property before or afterthat use.

(3) "Use" does not include:(i) a transfer of title to tangible personalproperty after its use as facilities, tools,tooling, machinery, or equipment, including dies,molds, and patterns, if:

1. at the time of purchase, the buyer isobligated, under the terms of a writtencontract, to make the transfer; and 2. the transfer is made for the same orgreater consideration to the person for whomthe buyer manufactures goods or performswork;

(ii) an exercise of a right or power over tangiblepersonal property acquired by a sale for use ifthe buyer intends to:

1. resell the tangible personal property inthe form that the buyer receives or is to

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receive the property; 2. use or incorporate the tangible personalproperty in a production activity as amaterial or part of other tangible personalproperty to be produced for sale; 3. consume the tangible personal propertydirectly and predominantly in a productionactivity by destroying, using up, or wearingout the property, other than throughobsolescence, to the extent that the property cannot be rendered fit for further use in aproduction activity, if the consumptionoccurs within 1 year after the property isfirst used in a production activity; or 4. transfer the tangible personal property aspart of a taxable service transaction; or

(iii) an exercise of a right or power over ataxable service acquired by a sale for use if thebuyer intends to resell the taxable service in theform that the buyer receives or is to receive theservice.

Appellant contends that inventory does not have to be held

solely or primarily for resale in order to be excluded from use

tax. Appellant relies primarily on the language of the statute;

Tawes v. Aerial Products, 210 Md. 627 (1956)(hereinafter “Aerial

Products”); Baltimore Foundry & Machine Corp. v. Comptroller, 211

Md. 316 (1956)(hereinafter “Baltimore Foundry”); and Comptroller

v. Glenn L. Martin Co., 216 Md. 235 (1958)(hereinafter “Martin

Co.”).

In 1956, at the time of the Aerial Products and Baltimore

Foundry decisions, the sales tax provisions appeared in Md. Code

(1951, Supp. 1956), art. 81, sections 320-327, and the use tax

provisions appeared in Md. Code (1951, Supp. 1956), art. 81,

section 368. In Aerial Products, the question was whether

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machinery and equipment, acquired by the taxpayer for the

production of goods for the federal government and then sold to

the federal government, were subject to a sales tax. Aerial

Products, 210 Md. at 630. The Comptroller imposed a sales tax,

the taxpayer sued for a refund on the ground that the machinery

and equipment were purchased for resale, and the Circuit Court

for Cecil County allowed the refund. Id. at 630-31. There were

several contracts involved in the case, but the pertinent

contract provided that the machinery and equipment were to be

sold to the federal government by the taxpayer and that title

would pass to the government upon receipt of the items by the

taxpayer, prior to the taxpayer’s use of them. Id. at 632. The

Court of Appeals applied art. 81, section 320(f) which, in

essence, defined sale as including all sales of tangible personal

property for any purpose other than when the purpose was to

resell the property in the same form as received, or to

incorporate the property as a part of other tangible personal

property, to be produced for sale by manufacturing, assembly,

processing, or refining. With respect to the case before us, we

note that the substance of the language relied upon in Aerial

Products now appears in Md. Code (1997 Repl. Vol.), Tax-Gen.

section 11-101(l)(3)(ii), as part of the definition of “use.”

At the time of the decision in Aerial Products, the

Comptroller’s factual findings were entitled to deference on

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judicial review. Aerial Products, 210 Md. at 632 (citing

Comptroller of the Treasury v. Smith, 205 Md. at 414). The Court

held that the question of whether the machinery and equipment

were subject to sales tax under the provision in question was a

mixed question of law and fact and affirmed the circuit court’s

decision after modifying the amount of the refund. Aerial

Products, 210 Md. at 645.

In Baltimore Foundry, a sales tax was imposed on the

taxpayer’s purchase of patterns used in the manufacture of steel

castings. Baltimore Foundry, 211 Md. at 318. The patterns were

sold by the taxpayer to its customer in addition to the steel

castings. Id. at 318-19. The taxpayer argued that it was not

subject to the tax because it purchased the patterns for resale.

Id. at 318. The taxpayer sued for a refund, and the Circuit

Court for Baltimore City affirmed the Comptroller’s action. Id.

The Court of Appeals again applied art. 81, section 320(f), as it

did in Aerial Products, and reversed the lower court’s decision.

Id. at 319, 322. The Court acknowledged that the taxpayer’s

purpose was to resell the patterns but observed that it also

intended to use the patterns to manufacture the products to be

sold. Id. at 319. The Court found it significant that the sales

were contracted for prior to the beginning of production, the

taxpayer’s purpose to resell was clearly manifested, and the

resale price was quoted at the time the taxpayer ordered the

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patterns. Id. at 322.

In 1957, the legislature amended portions of the sales and

use tax statutes. See S.B. 32, 1957 Md. Laws. In pertinent

part, the amendment added a new subsection (6) to art. 81,

section 320(f) and added a sentence to art. 81, section 368(d).

Prior to the amendment, section 320(f), part of the sales tax

statute, provided in part:

“Retail sale” and “sale at retail” shall meanthe sale in any quantity or quantities of anytangible personal property or service taxableunder the terms of this sub-title. Said termshall mean all sales of tangible personalproperty to any person for any purpose otherthan those in which the purpose of thepurchaser is to resell the property sotransferred in the form in which the same is,or is to be received by him, or to use orincorporate the property so transferred, as amaterial or part, or other tangible personalproperty to be produced for sale bymanufacturing, assembling, processing, orrefining. For the purpose of the tax imposedby this sub-title, the term “sale at retail” shall include but shall not be limited to thefollowing.....

The five exceptions that existed prior to 1957 are not

relevant to the case at bar. The 1957 amendment, however, added

another exception with new subparagraph (6) as follows:

Sales of tangible personal property and/orservices to any person who will use the sameas facilities, tools, tooling, machinery orequipment (including, but not limited todies, molds and patterns) even though suchperson intends to transfer and/or doestransfer title to such property or serviceeither before or after such person uses the facilities, tools, tooling, machinery or

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equipment.

The amendment to art. 81, section 368(d), part of the use

tax statute, is indicated by the language in italics as follows.

“Use” means the exercise by any person withinthis State of any right or power overtangible personal property purchased eitherwithin or without this State [by a purchaserfrom a vendor] and includes but is notlimited to the receipt, storage, keeping orretention for [an] any length of time of anybuilding materials by any contractor,builder, or property owner. This term shallalso include but not be limited to use offacilities, tools, tooling, machinery orequipment (including, but not limited todies, molds and patterns) by a purchaserthereof even though he transfers title toanother either before or after use by him andwithout regard to whether title istransferred to the other within or withoutthis State. This term shall not include thefollowing:

(1) The sale of tangible personal property byany vendor in the regular course of business.

(2) The incorporation of tangible personalproperty as a material or part of othertangible personal property to be produced forsale by manufacturing, assembling, processingor refining.

(Emphasis supplied). The legislature stated that the amendment

was effective retroactive to July 1, 1947.

In Martin Co., the Court of Appeals considered the 1957

amendment. Martin Co., 216 Md. at 241. In that case, the

taxpayer sued for refund of sales and use taxes imposed for the

years 1951 to 1954, contending that it purchased the property

with the intention of reselling, and thus, it was not subject to

2The Court in Martin Co. acknowledged that “Counsel for theappellant did point out in rebuttal argument that the Use Tax Actdefinition of ‘use’ in Sec. 368 (d)(1) excludes sales by vendors‘in the regular course of business.’ It does not employ thephrase found in Sec. 320 (f) of the Sales Tax Act dealing withsales ‘in which the purpose of the purchaser is to resell * * *.’ Cf. Comptroller v. Crofton Co., supra. Sec. 370 (c) of the UseTax Act carries over exemptions under Sec. 322 of the Sales TaxAct.” Martin Co., 216 Md. at 243 n.1.

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tax. Id. at 239. The Comptroller contended that the taxpayer’s

dominant purpose was to increase production facilities and not to

resell the property. Id. at 239. The Court of Appeals first

observed that sales and use taxes are complementary and that the

use tax applies to transactions subject to a sales tax but on

which no tax has been paid. Id. at 242. The Court, without

deciding the issue, evaluated the question of whether the

property was subject to tax by applying the same test for both

the sales and use tax statutes, although the language in the two

statutes was not identical. Id. at 242-43.2 The Court observed

that Aerial Products and Baltimore Foundry established that the

taxpayer’s purpose to resell, in Martin Co., was sufficient

because, under the applicable exclusion in the statutes, the

taxpayer’s purpose to resell the property did not have to be the

sole purpose. Id. at 243.

After acknowledging that the purpose of the 1957 amendment

was to change the result in Aerial Products and Baltimore

Foundry, in the past and the future, the Court addressed the

amendment. Id. at 245. The recitals in S.B. 32 stated that it

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had always been the intent of the legislature that the definition

of “sale” and “use” should exclude only tangible personal

property or services held solely for resale. Id. The Court

observed that the recitals were not part of the legislative

enactment. Additionally, the amendment imposing a retroactive

tax did not come within any exception that would permit its

retroactivity. Id. at 245. Consequently, the Court held that

retroactive application of the amendment was unconstitutional.

Id. at 258.

In 1988, the legislature, as part of a recodification,

combined the sales and use tax statutes into Tax-Gen section 11-

101, et. seq. See S.B. 1, 1988 Md. Laws, ch. 2. The substance

of former art. 81, section 320(f)(6) and former art. 81, section

368(d) appeared in Md. Code (1997 Repl. Vol.) Tax-Gen section 11-

101, as part of the definition of “retail sale,” in subsection

(f)(2)and (3) and again, as part of the definition of “use.” Md.

Code (1997 Repl. Vol.) Tax-Gen section 11-101 (l)(2)(ii) and

(3)(i).

In the case before us, appellant relies on the language in

Tax-Gen. (1997 Repl. Vol.) section 11-101(l)(3)(ii), the

substance of which preceded the 1957 amendment. The Comptroller

does not take issue with appellant’s reliance on that section and

specifically does not argue that this case is governed by the

language in subsection (l)(2)(ii) and (3)(i), which exists by

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virtue of the 1957 amendment. If this case were governed by 11-

101 (l)(2)(ii) and (3)(i), it would be clear that “use” of the

property in question could exist even though appellant intended

to sell the property. It would still leave open the question of

whether demonstration of the property, on the facts of this case,

constitutes use.

Assuming that this case is governed by 11-101 (l)(3)(ii), we

do not accept appellant’s argument that the case law and

legislative history reviewed above compel a conclusion that the

tax court committed an error of law. The Court of Appeals, in

Aerial Products and Baltimore Foundry, treated the question of

whether the sales tax exclusion applied as a mixed question of

law and fact and concluded that a collateral purpose of

facilitating production of goods did not prevent the application

of the exclusion when the taxpayer’s purpose to resell was clear.

See Aerial Products, 210 Md. at 627, 632. The Court did not

purport to lay down a general rule of law but decided each case

on the facts before it. Id.

Under the standard of review applicable today, we give

appropriate deference to the tax court’s decision, even as to

mixed questions of law and fact, including in some instances the

interpretation of statutes. See Marzullo v. Kahl, 366 Md. 158,

173 (2001)(“Even though the decision of the Board of Appeals was

based on the law, its expertise should be taken into

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consideration and its decision should be afforded appropriate

deference.”), and Board of Physicians Quality Assurance v. Banks,

354 Md. 59, 68-69(1999)(“[A]n administrative agency’s

interpretation and application of the statute which the agency

administers should ordinarily be given considerable weight by

reviewing courts.”).

In the case before us, the tax court concluded that the

demonstration inventory was being used in a manner that did not

bring it within the exclusion in question. The issue is whether

that conclusion was supported by substantial evidence. We answer

that question in the affirmative. There was evidence that over

seventy-five per cent of the machines in Foss’s inventory had

been there for over a year. The evidence showed that much of

that inventory equipment was used for training, displays,

demonstrations at trade shows, and loaned to educational

institutions. This was done in part to increase Foss’s market

share by promoting its products. There was also evidence that

the equipment was used primarily to show it could be adapted to a

particular customer’s needs as opposed to effecting a sale of the

item being demonstrated. Although some of the demonstration

models were sold to customers, evidence was before the tax court

that indicated those models were sold at a discount because of

their prior use in demonstrations. Evidence showed that customer

demonstrations often occurred multiple times before the customer

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purchased a machine. The record indicates such demonstrations

occurred about 150 times each year. In addition, the machines in

question were used to train the new owners. These sessions

occurred as frequently as three out of every four weeks each

month.

The tax court’s conclusion, a mixed question of law and

fact, that the use was sufficient to make the exclusion

inapplicable, is supported by the record. The question is not

one of law, and applying our deferential standard of review, we

accept the tax court’s conclusion.

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Adjudication Versus Regulation

Appellant contends that application of the use tax

provisions on these facts constitutes a change in policy that

requires promulgation of a regulation, with the attendant notice,

hearing, and publication. See Md. Code (1997 Repl. Vol.), Tax-

Gen. § 2-103; CBS Inc v. Comptroller, 319 Md. 687, 695 (1990)

(rule-making required when agency determination is intended to be

applied as a general standard, deals with broad policy issues,

and effects a material change in existing law). Appellant argues

that the determination that demonstrations constitute use “flies

in the face” of Aerial Products and Baltimore Foundry. The

Court, in those cases, treated the issue as a mixed question of

fact and law, as do we in this case. As stated previously, the

question is whether there is sufficient evidence to support the

tax court’s decision. We have addressed that issue above.

The tax court found that the imposition of tax in the case

at bar was pursuant to a long standing policy of the

Comptroller’s office that property not purchased solely for

resale was subject to tax, determined on a case by case basis.

This conclusion was supported by the testimony of Richard

Glacken, Chief Auditor in the Comptroller’s office. Mr. Glacken

testified that, at the time of trial, he had worked in the

Comptroller’s office, in one capacity or another, for 24 years.

Although appellant cites cases from other jurisdictions to

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persuade us that the Comptroller’s actions were inconsistent with

prevailing law, we decline to address those cases. Because of

the differences in statutory language, the nature of the issue

before us, and our standard of review, out-of-State decisions are

of little value. The fact that each party in its brief

distinguishes the cases cited by the other party demonstrates

that none of them are controlling with respect to the core issue

in this case, which is whether the tax court erred.

For the reasons stated above, we conclude that the tax

court’s decision is legally sustainable; thus we affirm the

judgment of the circuit court.

JUDGMENT AFFIRMED. COSTS

TO BE PAID BY APPELLANT.